LOS ANGELES—Moody’s Investors Service revised Citrus Valley Health Partners’ outlook to positive from stable on Oct. 22 and affirmed its Ba2 bond rating, affecting $67.7 million in rated debt.
The debt issued through the California Statewide Communities Development Authority consists of Series 1998 fixed rate debt and auction rate certificates of participation.
Moody’s analysts attributed the rating affirmation to a stronger balance sheet through deleveraging, a material increase in unrestricted liquidity from the state provider fee program, and revenue cycle improvements.
The improved outlook is based on analysts’ expectation that the current level of operating performance will be sustained under management’s financial strategy and that the extension of the provider fee program will further boost unrestricted liquidity.
CVHP commanded 31.9% market share in 2012 in its primary service area in eastern Los Angeles County, according to data provided by management in the Moody’s report.
The regional health system reports a $400 million revenue base generated by its three acute care hospitals and a hospice/home health care located in contiguous service areas that serve a population of close to a million people.
The health system benefits significantly from the California provider fee program as a large Medi-Cal provider. It receives 28% of its revenues from that source. Under the proposed three-year extension of that program, awaiting approval from the Center’s for Medicare and Medicaid Services, CVHP estimates it will receive a net $114 million over three years.
Strengths include that 66% of the regional healthcare provider’s debt structure is fixed rate debt structure. The system has no swaps and operates a defined contribution pension plan which limits demands on liquidity. It has a low debt load relative to its size of 18.1% debt-to-operating revenues.
Challenges include the hospital system’s payer mix and unfavorable demographics marred by high unemployment and a growing aging population. It’s dependent on supplemental government funding with Medicare making up 44.2% of gross revenues.
